American movies account for 80 percent of European box office receipts, although European movies have won only 5 percent of the American market. Of the 100 highest-grossing movies in the world last year, 88 were American, and seven more were co-productions involving American producers. After aircraft production, the entertainment industry is America's largest source of trade surplus.

Most European nations, having concluded that their native producers face an uphill struggle, now subsidize filmmaking, and many, like France and Spain, place quotas on the importation of foreign films. Such Latin American nations as Brazil and Mexico mix subsidies and import quotas to hold off American market dominance.

But it is France, where American movies hold nearly 60 percent of the market, that provides the most revealing case of cultural protectionism. France has not only built a bureaucratic barrier against American culture, it has constructed a notorious intellectual case against it as well. The French spend hundreds of millions of dollars subsidizing film production, extend interest-free loans to designated filmmakers, and have placed quotas not only on imports but on television time.

The European Community requires all TV channels to carry at least 50 percent European programming. France has upped this total to 60 percent for European programs, with at least 40 percent of the total devoted by law to native French programs. The French government even enforces a separate quota for prime-time shows to ensure that French programs are not shunted into the least favorable hours.

France's commitment to film protectionism became an international issue in the spring of 1994, during the General Agreement on Tariffs and Trade (GATT) talks. The world's leading trading nations negotiated widespread tariff reductions on goods and services, usually on a quid-pro-quo basis. American negotiators promised to remove many trade barriers against European goods, but they asked in return that the Europeans - especially the French - extend impartial treatment to American movies and remove the special taxes and quotas.

The French refused. Indeed, keeping out American films became one of the most important French national policies. The well-known director Claude Berri (Jean de Florette) reflected a popular attitude when he warned that "if the GATT deal goes through as proposed, European culture is finished." The French government even promised to veto any GATT agreement that did not preserve its protectionist policies toward film. French officials condemned Steven Spielberg's Jurassic Park as a "threat to [French] national identity." Despite the protestations of Hollywood, the Americans backed down and acceded to the wishes of the French government. After the French won the GATT battle, French director Jean Jacques claimed, "We removed the threat that European culture would be completely eliminated."

The "low" quality of many American films, and of much American popular culture, induces many art lovers to support cultural protectionism. Few people wish to see the cultural diversity of the world disappear under a wave of American market dominance. When the French try to protect their native productions, even cultured Americans are tempted to applaud.

But contrary to popular opinion, cultural protectionism does not further cultural diversity. Protected artifacts often lose their artistic and competitive vitality. Protection actually decreases an industry's chance of competing successfully in world markets.

Real cultural diversity results from the interchange of ideas, products, and influences, not from the insular development of a single national style. The years since the GATT treaty was concluded have been no exception in the case of French films, which may be less competitive today than they were before GATT. France's exports to the United States increasingly feature period costume dramas such as La Reine Margot, Ridicule, and Beaumarchais the Scoundrel - films that, because they require a knowledge of French culture and history to be appreciated, are seen by an increasingly specialized audience. Such films reflect one aspect of the nationalistic cultural insularity that results from market protectionism.

France's great cinematic tradition notwithstanding, the French audience for films had been shrinking before GATT. In the decade preceding the agreement, yearly movie attendance fell from 183 million to 120 million. Although as recently as 1986 French films outperformed American films in the French market, the American share of that market has continued to grow despite intense protective measures.

Eric Rohmer, the French director of such popular art house comedies as My Night atMaud's and Claire's Knee, believes the French should fight back with high-quality movies. Rohmer perceives Hollywood as a danger, but he is not a cultural protectionist. As he told The New York Times, "I say to people, 'I am a commercial film maker'....I am not supported by the state; I am for free competition."

But Rohmer's is a lonely voice. French movie subsidies are financed with a tax on movie tickets and videocassettes. Encouraging moviegoing is obviously not on the agenda of the protectionists. The real debate over cinematic protectionism revolves around who will determine which movies are financed: moviegoers or the state. Unfortunately for French culture, the state has been winning.

Flashback

Film protectionists frequently claim that French moviemakers cannot compete with Hollywood, even in their home market. While it is true that the French-speaking market is smaller than the English-speaking market, the historical fact is that French filmmakers have competed quite successfully with their Englishspeaking counterparts. Indeed, France contributed more to the early history of cinema than any other nation.

Louis and Auguste Lumiere, the first men to project films for a paying audience, pioneered the early development of the movie industry in the 1890s and enjoyed global success with their appealing documentary footage. Their contemporary Georges Melies was the world's most popular maker of short imaginative films, inventing an array of special effects and establishing a worldwide following.

From 1906 to 1913, the French dominated world cinema as no single country has since. Pathe, France's leading production company, controlled one-third of the world film business in 1908. Some estimates credit the French with 90 percent of the world's early film business, a dominance achieved without governmental assistance. At that time, it was the American filmmakers who responded with charges of cultural imperialism and calls for government protection.

The world's leading screen star, Frenchman Max Linder, dominated the development of comedy. In fact, film comedy and slapstick were almost exclusively French inventions. Benefiting from such French "cultural imperialism," Charlie Chaplin drew extensively on Linder's films in shaping his own film style and character. The French dominated most cinematic forms and even experimented with the Western before Americans had established it.

France's film domination ended with World War I. Not only were production resources diverted to the war effort, but French filmmakers made a strategic mistake. The French Pathe empire of the 1910s began making films to suit Parisian tastes, limiting their attraction for the growing international audience. Hollywood producers took advantage of this opportunity and began replacing the French as filmmaking leaders. By 1919, the French share of the world market had fallen to 15 percent.

Yet France's cinematic successes were by no means over. The french were to challenge Hollywood for film leadership in the 1930s, a period usually cited by film historians as the Golden Age of French cinema. Many of the films they produced in that era remain classics, among them Jean Vigo's L'Atalante, Marcel Carne's Daybreak, Rene Clair's A Nous La Liberte, Jean Renoir's Grand Illusion, and the same director's Rules of the Game.

At the end of the 1920s, the French film industry ranked fifth in the world. By the end of the 1930s, however, French production had doubled, and the French industry ranked behind only the United States. During this period, French cinema received no government subsidies. The restrictions on imported films were trifling and did not keep American movies off French screens.

The films of France's Golden Age were so good that French audiences preferred them to the American product. In 1936, for example, the six most popular films in France were all native French productions. Of the 75 most popular films, 56 were French; only 15 were American. In 1935, 70 percent of all film receipts in France went to French-produced movies.

The French Golden Age was renowned for the artistic and commercial freedom that directors enjoyed. Unlike most major film producing countries, France did not have a rigid studio system. Hundreds of independent producers made up the bulk of the market. Directors - whose will reigned supreme - often shopped their proposed projects around until they found a producer in accord with their fundamental vision. In addition, French censorship was weak, especially compared to the restrictive Hays Code of the United States.

French filmmakers faced a turbulent market in the 1930s. Pathe and other early giants had frittered away their dominance, and many of the small filmmakers were in perpetual financial trouble; each year dozens of them went bankrupt, with new producers taking their place. As is frequently the case in cultural history, however, financial pressure did not prevent artistic achievement.

A Laissez-Fair Mise en Scene

The laissez-faire environment of the French Golden Age allowed the influence of foreign films to fertilize French creativity. Director Jean Renoir claimed to love only Hollywood movies and to scorn French films. Renoir often went to see American movies three times a day, seven days a week, seeking inspiration from Hollywood. Historically, French directors have been among the most insightful fans of American cinema, and such American directors as Howard Hawks (His Girl Friday, The Big Sleep) enjoyed critical reputations in France before they did in America.

The famous French New Wave directors of the 1950s and '60s were to draw on American inspiration as well. Jean-Luc Godard began his career with Breathless, a work filled with references to Humphrey Bogart. Francois Truffaut was inspired by Alfred Hitchcock's Hollywood films. Such American directors as Orson Welles and Stanley Kubrick were seminal for an entire generation of French filmmakers, who nonetheless made movies that were undeniably French, movies that were embraced by a native French audience no more "corrupted" by American work than were the directors.

Moreover, French cinema has never been a culturally pure, Gallic product. Foreigners not only influenced many of the bestknown "French" films, they also directed them. Beginning in the silent era and continuing until the present, many of France's leading directors have come from all over Europe, including Denmark (Carl Dreyer), Russia (Yakov Protazanov), Spain (Luis Bunuel), Germany (Max Ophuls), and Poland (Krzysztof Kieslowski). The films of just these directors include some of France's finest work, from The Passion of loan of Arc, to L 'Age d'Or, to The Earrings of Madame D., to Kieslowski's recent trilogy, Blue, White, and Red. French filmmaking has been so diverse throughout its history that fascist Vichy propaganda during World War II attacked it for being too cosmopolitan and insufficiently "French."

From Fascism to Protectionism

Cinematic protectionists often portray quotas and subsidies as culturally enlightened. In fact, cinematic regulation and subsidization came to France at the hands of the fascist regimes of World War II. Contemporary French film policies are a direct extension of France's wartime heritage.

The laissez-faire environment of 1930s cinema was unpopular with many French filmmakers, who wanted the state to protect their interests. Protectionism was debated but, largely because of pressure from the Americans, never passed. Such policies were enacted only after France had lost her national independence. The collaborationist Vichy government developed quotas and subsidies as part of its program to restructure the French economy. French economic and cultural activities were now to serve the interests of the government, not the interests of consumers or artists.

In 1940, the Vichy government created the forerunner organizations to the modern French film bureaucracy. The primary organization, the COIC (Comite d'Organisation de l'Industrie Cinematographique), "rationalized" the French film industry and attempted to reverse the decline in profitability caused by the war. The COIC established yearly quotas limiting the number of French films produced, and it required that all film financing be approved by the Vichy government. The quotas, combined with guaranteed financing for approved projects, virtually assured the profitability of French movies. The French government was allowed to finance up to 65 percent of cinematic projects that were deemed worthy by the COIC, usually at very low interest rates. At the same time, the Vichy government banned American movies. French movies suddenly held 85 percent of the local market, a level they were never to attain again.

The Vichy program of cinematic control was based explicitly on the model then used in Germany. State rationalization of industry was a centerpiece of Nazi ideology and economic policy.

While Vichy policies assured profitability, quality suffered. With financial support came censorship and restrictions. Filmmakers lost their autonomy, as they produced bland and predictable films to assure access to studios and financing. Vichy films were moralistic, conservative, and propagandistic; many dramatized such themes as respect for authority, the sanctity of the family, the corruption of city life, and the need to return to the country. Few of these productions have achieved any subsequent recognition. (The Vichy government also began a campaign against the cinematic masterpieces of the laissezfaire Golden Age, portraying them as effete and decadent. The supposed depravity of Golden Age films was sometimes even blamed for France's fall to the Germans.)

Vichy's regulations were justified on both ideological and economic grounds. The earlier practice of cinematic laissez faire was portrayed as financially unstable and irresponsible. At last, French filmmakers would have their chance to operate in an economically rational environment, without subjecting their fortunes to the unpredictable whims of the marketplace.

Occupied Screens

French cinema did produce masterpieces during the war, but not under the Vichy regime. Rather, the best works were produced in Nazi-occupied France. For reasons of their own, the Nazis allowed French filmmakers more artistic freedom than the Vichy government did. French film creativity blossomed despite the state, not because of it.

The Nazis' early cinematic policy flooded occupied France with German films dubbed into French. Even Vichy films were kept out, and many prewar French films were confiscated or destroyed. But French audiences did not enjoy most Nazi movies. Despite high initial attendance for these films, moviegoing petered out. Concerned about creating a discontented occupied populace, German authorities switched course. Nazi policy began to encourage French-produced films as both entertainment and pacification.

The Nazis even set up a new cinematic company, Continental Films. Its funds came ultimately from Joseph Goebbels's Ministry of Propaganda, but most Continental films were not explicitly political. As long as the company's productions did not directly threaten the Nazi ideology, it could operate unhindered. Unlike in Vichy France, Continental filmmakers were not required to adopt a patronizing, moralistic tone in their pictures.

These productions proved to be surprisingly popular and sophisticated. Joseph Goebbels himself was disturbed after viewing two Continental films; he feared that the new company might prove to be a powerful competitor to German films in overseas markets. The Germans nonetheless continued to tolerate and encourage French cinema. The Nazi "tolerance," however, was in no way benevolent but was based upon the Nazis' quest for cultural protectionism and imperialism.

The Germans saw the American film industry as a cultural threat to their quest for ultimate international hegemony. Nazi strategists decided to cultivate the French film industry as a counterweight to the growing American presence in world film markets. French movies were "fun" and "frothy," qualities that Nazi films lacked. The French had the most prestigious and most popular film productions in Europe, and the Nazis did not want to squander their newly captured asset.

Continental, as a German company, was not subject to Vichy controls or COIC regulations and quotas. French filmmakers preferred the artistic atmosphere of occupied France to that of Vichy, and by 1942 few French filmmakers were left in Vichy except for paid propagandists.

The occupation years became an amazingly fruitful era for French filmmaking. Directors Robert Bresson and HenriGeorges Clouzot started their careers during this period. Theatrical talents such as Jean Giraudoux and Jean Anouilh, and poet Jean Cocteau, turned their efforts to the cinema as well, often with notable success. The team of Marcel Carne and Jacques Prevert actually attempted to subvert the Nazi regime with such extraordinary allegorical period films as Les Visiteurs du Soir and the famous Children of Paradise, widely considered to be one of the greatest films ever made. "[F]ew, if any, periods of French film history," writes film expert Alan Williams, "have produced so many acknowledged masterpieces and near-masterpieces in so little time." That achievement is a tribute to French filmmakers who overcame the state authorities attempting to exploit them.

Normalizing Bureaucracy

After the Liberation, the French government decided to keep the cinematic institutions, and the system of regulation and subsidization, that had been set up by the Vichy government, with changes in emphasis only. The film institutions and regulations created by the Petain regime were maintained intact. The COIC was converted into the CNC (Centre National de la Cinematographie) and given a new task. Rather than limiting the number of French films, the CNC was to help the French film industry battle Hollywood by limiting foreign films.

Moviemakers who had left France during the war were struck by the changed atmosphere they encountered upon their return. Rene Clair, one of France's leading prewar directors, was especially disillusioned. He contrasted "the atmosphere one breathes in our country with the freer air of America.... For someone who has not seen France for five years, there can be no doubt that Nazism has left its mark on it. Yes, a country cannot live through fascist rule for so long without suffering in some way. For instance, I'm struck by the artificial barriers placed in the way of any activity. I can't accept that someone wanting to make a film should have to submit requests to so many authorities, who will refuse if he can't prove he's conformed to various arbitrary regulations."

French regulators maintained or extended many of the entry restrictions for French cinema. Legal rights of exclusion were granted to many unions. The technicians' union, for instance, was able to demand that no one could direct a film unless he had worked as assistant director on at least three previous features. Postwar French cinema was virtually closed to new entrants.

The postwar French government negotiated a quota agreement with the United States in an attempt to protect French filmmakers. The French government required cinemas to show 16 weeks of French movies a year. The Americans, who had feared more stringent restrictions, waived some of France's wartime debts in return for a quota that was perceived as lenient. The French have made these quotas progressively stricter.

Protection from the Protectionists

Protectionist governments are themselves responsible for many of the problems faced by their domestic moviemaking industry. Consider just a few of the burdens that the French government places upon its moviemakers.

Cinema taxes have been a staple throughout the history of French filmmaking, but lawmakers looked to such taxes with new interest after World War II. In the late 1950s, this tax reached as high as 48 percent of gross theatrical receipts. Cinema taxes were lowered in the 1970s with the introduction of the value added tax, but the tax still ranges from 17 percent to 19 percent, on top of the normal VAT rate of 14.5 percent, with an extra 4 percent for X-rated movies.

The French government imposes stringent import quotas on Japanese VCRs. These machines are especially expensive in France, and less common than in America or many other comparable European countries. Unlike their American counterparts, French filmmakers find it difficult to tap into the lucrative home viewing market.

Restrictions on television have hurt French filmmakers even more. As in most countries, French TV funds cinema through the purchase of transmission rights; about 40 percent of French movie funding comes from TV. In 1980, the TV audience for movies exceeded the theatrical audience by a factor of nearly 24.

Despite the importance of TV, the French government has forced the cable TV market to grow slowly. Canal Plus, the French equivalent of HBO, is required to pay 18.5 percent of its pretax revenue to subsidize the movie industry. In return, the channel receives the right to carry French films, but filmmakers receive the money from Canal regardless of whether their films attract viewers.

New technologies are presenting protectionists with a major challenge. European governments have thus far succeeded in regulating the content of network programming and in ensuring that 50 percent is of European origin. But satellite and cable systems, with 100 or more choices, will break down the effectiveness of quotas. Either the quotas or the new technologies will have to go.

Cable systems will bring in even more American television. Even if 51 of 100 channels are of European origin, the other 49 might command most of the viewing attention. National content restrictions can steer viewing habits only when the menu of choice is extremely limited. The French government, .well aware of this fact, has prevented many services (including the Cartoon Network) from being carried over French cable. Satellite systems will have an even more subversive effect on national origin quotas: Dish antennas allow viewers to capture television signals from anywhere in the world.

Cultural protectionists are thus faced with a dilemma. If the new technologies are allowed, national origin quotas will rapidly become ineffective and eventually become irrelevant altogether. If the new technologies are kept out, television and movie markets in the regulated country will become even more insulated and even less competitive in world markets. The scope of required protection will increase, and viewers will receive an even weaker product.

The reason is that quotas, like subsidies, often harm filmmaking. Quota arrangements, whenever they have been in place, have encouraged the hasty production of low-quality films to meet the quota. Such "quota quickies" have been produced in Canada, Great Britain, France, and Brazil, whenever those countries embraced film protectionism. Quota quickies employ formulaic, low-budget treatments of sex and violence, and encourage the domestic industry to adopt the worst tendencies of American moviemaking. Ironically, the profits from quota quickies are often reaped by the American financiers who put up the money, sometimes through French subsidiaries.

The criteria for awarding subsidies have harmed film quality. Prior to 1953, French governmental subsidies were based upon receipts from a producer's previous films. This system cemented the position of insiders at the expense of new industry entrants. The growing mediocrity of movies was recognized, which led to reform.

The French now claim to subsidize movies on the grounds of artistic merit, rather than attempting to pick the moneymaking ventures. In 1953, legislation dictated that the French government could subsidize films based only on quality. While the tremendously successful New Wave movement was probably encouraged by subsidies, the program appears to have resulted in decades of diminishing returns.

The interest-free loans offered by the government also damaged cinematic quality. The loans must be repaid only if and when the project turns a suitable profit. This policy lowers the incentives for making a successful film.

Furthermore, European film subsidies frequently end up in the pockets of American moviemakers, who set up joint production ventures with European companies. A given film may be nominally European, but much of the capital comes from the American company, which captures much of the subsidy's value. Even the "European" company is often a foreign subsidiary of an American one. One such classic "foreign" film, Last Tango in Paris, was made by United Artists in combination with a French subsidiary and an Italian company. Through suitably complex international arrangements, American producers can collect subsidies from as many as three European governments; these subsidies may cover up to 80 percent of a film's cost. The result is that European taxpayers end up underwriting poorly scripted films they don't want to see, with American companies reaping most of the financial benefits, and all in the name of European culture.

What Quota? Which Art?

The French government does not stipulate that symphony performances represent a certain percentage of native-born composers. In nearly every country in the world, native composers are underrepresented at the expense of the Germans and the Austrians. Yet who complains that cultural diversity is threatened by Germanic specialization and excellence? Cultural or national quotas for symphonies would do little to produce a French equivalent of Beethoven.

Yet the French government requires radio stations for popular music to play at least 40 percent French music. "How could anyone find the idea that two songs out of five should be French excessive?" asked one French official. "Without such measures our culture will be homogenized." To protect diversity, the French even established an official cultural office for native rock 'n' roll, although the project was subsequently abandoned.

Cultural protectionists concentrate on "popular culture," precisely the area where American artists have enjoyed phenomenal successes and where European producers are in greatest need of exposure. French consumers are pointing out an underlying inadequacy in contemporary French culture. The protectionists resent this inadequacy, just as many Americans resent the high culture and supposed snobbishness of the Parisians. In both cases envy and insecurity are at work.

Advocates of cultural protectionism often portray consumer sovereignty as a myth. According to this view, oligopolistic American distributors create demand for their movies through advertising. The sheepish public, in turn, responds passively to whatever is offered.

If this view were correct, supporting European cinema would be easy. The government need not subsidize filmmaking, or even place limits on American film imports. All the government need do is subsidize advertising for native films, or perhaps restrict advertising for American movies. But such policies obviously would not work. It is the European movies that fail to draw customers, not the European advertising campaigns.

When European audiences do not like the content of American products, they have proven remarkably resistant to them, no matter how heavy the marketing. Few American exports to Europe have been supported by as much hype and advance publicity as EuroDisney. One fearful critic called the park "a terrifying step towards world homogenization." Yet when EuroDisney opened, the French didn't like it. French culture has so far survived.

The Other Side of Protectinism

If the United States had embraced cultural protectionism, Hollywood would never have achieved its artistic richness and commercial strength. Just as French filmmakers have borrowed from America, so have the Americans drawn much from Europe. Jean Renoir, for example, made some of his best movies in Hollywood. Last year, Renoir's countryman Luc Besson (La Femme Nikita) followed in his footsteps to direct The Fifth Element. Alfred Hitchcock, Fritz Lang, Billy Wilder, and Ernst Lubitsch are among many European emigres who brought enriching ideas and techniques to the United States.

American film technique owes much to French filmmaking. The visual presentation of Schindler's List, for example, would have been inconceivable without Spielberg's knowledge of European cinematography. The best American directors, like their European counterparts, are avid students of film as a cosmopolitan art that transcends national boundaries.

The Americans have drawn more than ideas from the French film market. Hollywood even drew some of its early capital from French products. In 1912, Adolph Zukor paid $35,000 for the rights to the French movie La Reine Elizabeth, an astonishing sum of money at that time. The movie was a huge hit in America, and Zukor used his profits to start Paramount Pictures.

Film finance has become increasingly global. Many so-called Hollywood products are financed from abroad. The Last Emperor and Dances With Wolves, for instance, both relied on British capital. French films are not uncompetitive because they lack the financial resources of Hollywood; rather, they lack financial resources because they are uncompetitive. During the Golden Age of the 1930s, German, English, and American capital flowed into French films.

Today, the European and French markets help support diversity in Hollywood. Some of the most interesting and creative American filmmakers - Woody Allen, for example - rarely produce domestic blockbusters. Their films are financially viable because they receive fan appreciation and critical recognition abroad. By supporting these directors, Europe helps improve Hollywood, benefiting both American and European audiences.

Quotas on American movies hurt independent filmmakers far more than they hurt big commercial directors; if European cinemas can show only a limited number of foreign films, they will cut a new film by Woody Allen or Jim Jarmusch before they cut Titanic. Thus, European quotas make it harder for independents to finance their films. Quotas in even a single country decrease diversity in film markets around the world.

No government can legislate artistic success. Film culture, like all culture, is dynamic. It isn't protection that it needs; it is stimulation. Without it, the form atrophies. If Europeans treat their films as weak, those films will become permanently weak.

Tyler Cowen (tcowen@gmu.edu), a professor of economics at George Mason University, is the author of In Praise of Commercial Culture (Harvard University Press).

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